I am going to buy a house this month, here's how

This thread is very informative and has received a lot of positive feedback. I would like to see one started for a short sale or a subject to property as well.

Thank you for sharing.

i am new investor, i learn a lot from this thread.
thanks for giving so much knowledge.

Ok, I’m back after a small mental break. So far I have decided what I want to look for and where I want it to be. I have identified and viewed several candidates from the MLS, craigslist, HUD and other investors property list. I also did the math to see how I want the costs to flow and have started looking for private money. I haven’t made any offers yet and have a few more properties to look at before I do; a step I’ll complete later this week.

In the mean time I have some additional work that I need to do, which is identifying the population of potential buyers that I’ll be marketing these and the other houses that I hold as inventory to.

Normally when I sell houses to retail, owner occupant buyers, I use a combination of newspaper ads, a flat fee MLS listing, street signs, flyers, a website (see www.ourhomeiscalling.com ), a voicemail box system and postcards; this time will be no different.

For the newspaper ads I’ll use the Atlanta Journal Constitution, which gives me the widest exposure possible to people that are seeking a new home to buy. The cost will be about $250 per month (weekend editions in print only, plus everyday online) and the properties will be exposed to a metro population of 2.5 million, plus people looking to relocated to the area. I do the weekends print version because the cost of paying for 30 day in print is ridiculous and much more than I’m willing to pay.

For the flat fee MLS listing I’ll use a realtor that I know that charges $399 for 90 days. The reason I do this is to minimize realtor commissions and to give the properties the widest exposure to realtors and buyers online. If the eventual buyer is represented by a realtor, then I won’t have an issue paying out 3%, but won’t if I don’t have to. I’ll run the listing for 90 days at a time til sold at full retail market value.

I use a local sign making company to print and place my street signs in the market. The cost per sign is about $5, which includes printing and placement. I let them do it cause everytime I do it I get paranoid about getting caught and fined by the sign police ($500 that one time I got caught). Normally I’ll put out between 15-20 signs per week til the property is sold with a message designed to drive buyers to my website or to call my voicemail box service. These signs will be placed within a 5 mile radius of each property; hopefully I’ll have several homes in the same general area so I don’t have to duplicate this or any of my other marketing efforts.

Flyers: I have a couple of templates from some of the courses that I purchased that all work pretty well. I’ll have some in the info boxes attached to home for sale signs I’ll have in front of each house as well as in them; I’ll also pass out about 100 each month at shopping centers, barber and beauty shops, etc…

The website will be updated with the properties that I buy only after all of the repairs have been completed. It will list all of the homes’ amenities, beds, baths, asking prices and neighborhood info. It will also have tons of photos, descriptions of how my owner financing and lease to own programs work, plus turn by turn directions to each house from several different major highways.

In addition to those marketing tools, I’ll also be using direct mail in the form of post card from the US. post office. The post office website sells a great service where you can have custom postcards printed and delivered for only 31 cents each card. It allows you to create an account and upload your mailing list to be mail merged to each post card. I’ll use their 4 inch black and white versions, which I’ll schedule for twice a month for each area til all properties are sold.

Of course, to send post cards you have to have a list of recipients to mail them to. How does one do this? Well there are several ways; I’ll give you two that I use.

First off, I’ll use one of the online sales lead services to buy a list of all apartment renters in the area that I’ll be having houses in. This will give me the names and mailing addresses of the occupants. The main thing I want from this however, is the mailing addresses for all of the apartment complexes and the sequences that they use. Some apartment complexes use sequences like Apartment c-1, c-2, c-3, or 803 Stone trail; so its good to know this as the post office will return incorrectly addressed postcards and still charge for the service. When I mail out my card I wont use the names as the addressee, I’ll use “current occupant”.

To make the lead list as effective as possible, I’ve got to know as much as I can about the people that I’ll be sending these post cards to. The most important thing I need to know is if the people in these apartments can afford to pay the note for the houses that I’m selling. Now this isn’t an exact science, but one of the things that I do is to get the apartment finder magazine that you can get for free at the local supermarket, and identify those apartment complexes where the monthly rent for 2 or 3 bedroom units are reasonably close to the mortgage on one of my retail properties. So if I know that my houses will sell for $120k and the note will be about $1,000 a month, I’ll want to target apartments complexes where the rents are at least $700 per month. This step will also let me know the apartment complexes that I need to target for my Home for sale signs.

The other way that I’m using to find potential buyers is to target the renters of houses in the area by finding out who the landlords are and targeting their tenants (don’t be shocked, you’ll do it too). I can buy this list from a list broker as I do for apartments dwellers, or I can do this using a tax record service list reallist or realquest.

To get the list from the tax assessor database you have to do the following (for GA at least):

  1. Go to the search function and do a general search
  2. select your county and zip codes
  3. Select the date ranges purchased
  4. select purchase price ranges
  5. select bed and baths
  6. properties where the owners tax billing address is not the same as the property address.

So for the areas that I am interested in I performed the following searches:

State: GA
County: GWINNETT
Selected Zip: 30039, 30044, 30045, 30047, 30078
Record Date: 01/01/2005 to 07/31/2008
(I want properties where the landlords have held title over a year)
Sale Amt: 80000 to 150000
(Many of these will have rents in the range that the mortgages will be in)
Owner Occupied: no

AND
State: GA
County: DEKALB
Selected Zip: 30039, 30058, 30083, 30087, 30088
Record Date: 01/01/2005 to 07/31/2008
Sale Amt: 80000 to 130000
Bedrooms: 3 to 5
Bathroom: 2 to 5
Owner Occupied: no

The results of these searches were about 700 properties with potential buyers (renters) for me to send direct mail to. The next step will be to cut the lists down by reviewing and removing those properties that are currently owned by a bank or the government. You’ll see names like these:

Federal National Mortgage Asso
Federal Natl Mtg Assn Fnma
Freeport Title & Guar Inc
Gmac Mortgage Corporation
Jp Morgan Chase Bank Na
Jp Morgan Mtg Acquisition Corp
Secretary Of Hsng & Urban Dev/
Secretary Of Hud
U S Bank Nat Asso As Trtee
U S Housing & Urban Dev
U S Veterans Affairs
Us Bank Na
Us Bk National Assn

Please note that if the property is owned by a company, LLC or trust, it’s probably an investor, so keep it on the list.

Having done that step, I now have 600 houses that according to the latest data recorded and reported by the tax assessor, are privately held. I can use this info to create my mailing lists for post cards.

Now that I’ve done all this, i guess I can get back to the biz of finding houses, making offers and find private lenders. Also need to get back to football game (6.47 left in the 3rd quarter, pittsburg just intercepted san diego).

Have a goood week and stay tuned…

Ok, I’m heading back out today to view houses and to meet with one of the private lenders that I have used in the past. I’ll be looking at the remainder of the REO and investor held properties that was looking at last week as well as the following HUD homes (note the prices):

listing# address city Price bedxfbathxhbath
#605356 1752 MARIE WAY Lawrenceville, 30043 $61,600 4x2x0
#468390 2561 RAMBLING WAY Lithonia, 30058 $61,800 3x2x0
#620885 3423 CENTERSET COURT Snellville, 30039 $50,000 3x2x0
#598314 4497 FOWLER LANE Snellville, 30039 $58,000 3x2x0
#610379 4083 MASONWOOD COURT Snellville, 30039 $66,800 3x2x0
#548177 4425 CARRIAGE TRAIL Stn mountain, 30083 $39,000 3x2x0
#610634 5421 RIDGE FOREST DRIVE Stn mountain, 30083 $44,000 3x2x0
#617608 1292 MUIRFIELD DRIVE Stn mountain, 30088 $40,500 3x2x0
#543121 2107 SCARBROUGH ROAD Stn mountain, 30088 $48,800 4x2x0

If you want to see photo, just pick a house and do a google search

After viewing all of them I will formulate my offers and write up the contracts. For the HUD homes I’ll have one of my realtor friends present the offers.

Later I’ll be networking at the Georgia real estate investors association meeting to pass out flyers on my wholesale deals and on the mortgage loan products (guess I need to make some flyers) that I have available. I’ll also be on the look out for potential private lenders.

It’s going to be a great week. Let’s all make a fun one too.

Please continue to give me your thoughts on this and thanks for the input

Hassan

Ok, my lunch meeting with the private lender went well. Actually she was trying to find an investment property to own. After discussing her options, it was agreed that I would try to find a couple of potential deals that would fit her level of experience and the amount of money that she was willing to commit.

I’ll probably have to find her a property that is owned free and clear by a private seller (not a bank). To make it work I’ll have to structure the deal in such a way that the owner would take back a 30 year note with a 5 year balloon, at about 40%-50% of LTV. She’ll put down several thousand for down payment, get title and make payments of about $400-$500 a month. After about 12 months she can refinance at about 60% LTV with a conventional lender or FHA loan, paying off the owner financing and getting title without having to put down the 20% that most lenders are requiring now.

She is also open to investing about $10-15k to partner in another deal with me as a private lender. That’s not enough to go into a deal in market as a first position lender, but it is enough for a second position lender. If we partner up, I’ll secure her money with a mortgage, title insurance, property insurance and promissary note; I’ll also provide a certified appraisal showing the discount to after repair value that she’ll be benefiting from.

I also took a look at several of the houses I mentioned earlier, still have a few more to look at and a networking event for tonight.

BTW, as soon as I get ready to make offers I’ll go over the total math on a couple of the deals with you.

hassansr,
Your thread has made me fully grasp just how much work is involved wholesaling and being the middleman in all those deals.

Your step-by-step description should go right into a “How to” book. This is very different from my real estate niche and I am enjoying it.

I wish you all success with finding those good deals.

Furnishedowner

Ok, I have finally completed the task of riding the east atlanta area looking at the rest of the houses to consider making offers on (yes that took a while). Some were private held, some held by investors, most were held by banks and just a few were owned by HUD. Normally I would have property locators (bird dogs) out looking for and at houses for me, but this time I wanted to get back out into the street again to see how things really are on the ground in my market.

I found these houses by doing searches on craigslist, MLS, HUD.gov and other wholesalers websites. I also did an email blast to people on my email list to solicit leads. As a result of the search I found about 50 potential candidates to review and personally visited and inspected about 30 of them. I looked at homes in Snellville, Lithonia, Stone Mountain, Norcross, Lawrenceville, and Lilburn, Georgia. Having looked at a bunch of them over the past two weeks, I finally got around to viewing the remainder today.

Except for 2 homes in Snellville, none of the HUD homes impressed me. Most needed too much work, were in badly depresses areas, or were properties that I would never touch. On the HUD.gov pages there were some decent property descriptions plus photos, which for some reason I didn’t bother to look at prior to going out (I guess I got lazy). Normally I would look at photos to eliminate houses that don’t look promising, but since the HUD homes were in the path of the other REO and investor held properties that I was going to be seeing, I just added them to my mapquest list and rode out to see them; boy was I surprised when I arrived at some of them. Do your self a favor and make sure that you see photos of what you’re going to see prior to going out so that you dont waste time looking at houses you’ll have issues moving.

Of the remaining bank held (non HUD), privately held and investor held properties, I identified 5 additional properties that appear to be promising. Here are the details (because I don’t want anyone else making offers on these properties and giving the owners hope that there actually is demand for their ugly houses, I’ll just give the street name and values):

  1. Sunderland: 3 bed 2 bath, taxes $1,061. asking price $33,900, ARV in today’s market about $90k, ARV in a normal market about $120k.

Repairs:
Interior paint
Carpet
Linoleum flooring
Appliances
Drywall repair
Pest control (bugs and rats, I think)
Minor roofing repairs
Landscape
Misc expense

  1. Joel Court: 3 bed 2 bath, taxes $1,234, asking price 36,900, ARV in today’s market about 90k, ARV in a normal market, about $105k

Repairs:
Interior paint
Carpet
Linoleum flooring
Appliances
Drywall repair
Pest control (bugs)
Minor roofing repairs
Landscape
Misc expense
HVAC
Cabinet repairs
Copper wire
Plumbing

  1. Holland: 3 bed 2 bath, asking $48k, ARV in today’s market about 80k, ARV in a normal market, about $100k

Repairs:
Interior paint
Carpet
Appliances
Drywall repair
Pest control (bugs)
Minor roofing repairs
Landscape
Misc expense
HVAC

  1. Carole: 3 bed 2 bath, asking $53,900k, ARV in today’s market about 100k, ARV in a normal market, about $110k

Repairs:
Interior paint
Carpet
Appliances
Drywall repair
Pest control (bugs)
Minor roofing repairs
Landscape
Misc expense

  1. Exeter: 5 bed 4 bath, asking $54,900, ARV in today’s market about 100k, ARV in a normal market, about $120k. This house was kinda turned into a duplex with two kitchens. Don’t know if I would keep it as such or make it a single family home; would need to discuss with contractor.

Repairs:
Interior and exterior paint
Carpet
Bath flooring
Appliances, both kitchens
Drywall repair
Cabinet repair
Mold abatement
Pest control (bugs)
Minor roofing repairs
Landscape
Misc expense
HVAC repair

  1. New Castle: 3 bed 2 bath, asking $55k, ARV in today’s market about 80k, ARV in a normal market, about $100k. Has backed up sewage problem that flooded basement; will need deep cleaning. Cute house, but I’ll probably pass on this one.

Repairs:
Interior and exterior paint
Carpet
Appliances
Drywall replacement
Pest control (bugs)
Mold abatement
Flooring needs leveling in kitchen
Landscape
Plumbing
Misc expense

  1. Burnt Leaf: 3 bed 2.5 bath, asking $60k, ARV in today’s market about 100k, ARV in a normal market, about $120k

Repairs:
Interior paint
Carpet
Appliances
Pest control (bugs)
Landscape
Misc expense

  1. Cherie: 3 bed 2 bath, asking $59,900, ARV in today’s market about 90k, ARV in a normal market, about $115k

Repairs:
Interior paint
Carpet
Appliances
Drywall repair
Pest control (bugs and termites)
Tilework
Landscape
Misc expense

  1. Trenton: 3 bed 2 bath, asking $59,900k, ARV in today’s market about 90k, ARV in a normal market, about $115k. I like this house, light rehab

Repairs:
Interior paint
Touch up exterior paint
Carpet
Appliances
Pest control (bugs)
Landscape
Misc expense

  1. Downs: 4 bed 2 bath, asking $59k, ARV in today’s market about 90k, ARV in a normal market, about $117k

Repairs:
Interior paint
Carpet
Appliances
Pest control (bugs)
Landscape
Misc expense

As you can see, property values have dropped a bit in the areas that I have targeted; this implies that I may have to lower my price expectations for selling them to retail buyers; which I will; lowering the current ARV range to $90k. That’s ok, because I am taking a long term view at all these properties. If I can flip them in 6 to 12 months the prices will be lower than if I hold them for 13 to 24 months; I’m ok either way. It also means that I’ll have to push my offering prices even lower to account for at least 6 - 12 more months of sliding values.

For most people that last part would be a major issue, however I see it as an opportunity. In my mind, the longer the recession goes on the better. To make things even better, the longer the period that the FHA, HUD and REO bank’s make it hard for regular investors
to take the excess inventory off the market, the larger the pile of it will be; further reducing values and making it easier for cash buyers to make a killing.

In the next addition, I’ll discuss how I formulate my offers, how I write the contracts and how I present them to the sellers / realtors/ HUD. I’ll also show how the followup process works and the additional steps I’m taking to find private lenders. One last thing I’ll do is upload some photos so you can see how they look.

Thanks again for following this thread and your input. Please keep the questions and comments coming.

Im an interested r.e.investor and am very appreciative,and also very impressed with your thread! Im not only following but have made a copy for myself. you have inspired me to GET OFF THE FENCE AND GET IN THE GAME!! There So much B.S. out there but you stand out with an actual demo on what your doing…Im sure I speak for others out there… YOU DA MAN!!! KEEP DOIN WHATCA DOIN!! GOD BLESS!! and may you find success in ALL your ventures!!!THANKS!

hassansr, thanks for creating this thread & sharing your knowledge. It’s very helpful to us new people.

This is my first post, :smile and I am noticing the opportunities for everyone who are prepared and are preparing, that 2009 is going to bring. By far this thread has motivated everyone who is newbie like myself to get out the “sidelines” and join the game. :bigthumbup Great Stuff and Thank You :beer

How are the deals coming?

They’re coming. I’ll update the post shortly

Ok, It’s now time to make offers. Since these are all bank owned I’ll have to deal with their rules :rolleyes. But before I make any offers I’ll need to confirm my estimates as to the after repair values (ARV), do the math to get the maximum allowable offer (MOA), and calculate my starting offer prices.

To validate my estimated ARV, I’m going to have to look at several sets of data; that being the active, expired and pending listings in the area from MLS, plus a list of properties in the area that have been sold within the past 6 months (preferably from the same subdivision for each property) from the county tax records. I’ll have one of my realtor friends pull the info from MLS. If you don’t have any realtors willing to assist you, you can use realtor.com, zillow.com or one of the paid services like reallist or realquest or get an appraisal. Normally, I pull this info When I first create my list of potential deals to take a look at and before I go out to view them. I also pull the same list afterwards (especially if there is a gap of time between the initial time that I pulled the data and the date that I make offers) before I make offers just to make sure that the properties are still available.

I took a look at the list this morning and have noticed that 4 of the properties that I had identified as worth looking at are now under contract (the status in MLS is pending). This happens all the time and is the result of the fact that I took too long to followup and make offers. That being the case, I’m going to remove them from my list for now, leaving 6. I will however keep tabs on them just in case they don’t close within the next 45 days.

In addition to reviewing the list for any status changes, I also looked to see if there were any new listings or changes to asking prices that had been posted on MLS since I first pull my data 2 weeks ago. If so I took note of the prices and if they were reasonably similar to the ones I am interested in. Changes in prices may cause me adjust my ARV upwards or downwards, depending on the number of changes, which would also of course affect my offering prices. As a result of this view, I lowered my ARV estimates on most of the remaining properties. Please note that the asking prices DO NOT give reliable estimates of values, just an idea of what they may be, neither do the values you’ll see on tax records on their own. To get good estimates you’ll need at least 3 sets of data plus an appraisal BEFORE you make a purchase.

As I mentioned before, when making offers you have to use the MAO formula, which is where you take the est after repaired value, multiply it by 65%. From that number you subtract repairs, marketing expense, closing costs, misc expense, holding cost, and your minimum profits. One thing you have to take into consideration is that you are never allowed to pay MAO. That being the case, you have to start your negotiations at numbers well below MAO or you’ll pay too much and lose profits.

So for the 6 remaining, the numbers would like this (value revisions are struck thru):

Marketing expenses for all are as follows (Assuming 6 months to resale):

ADS 1,500
SIGNS 2,600
DIRECT MAIL 372
FLAT FEE MLS 798
TOTAL MARKETING EXPENSE 5,270

Have any of you noticed how much work this really is? A lot! That said each property has to give me a minimum profit or I won’t do the deal. My minimum profit for each of these deals is $15k, which I plan on pulling out from the funds I borrow from the private lenders within the 65% of the ARV. The equity between 100% of ARV and 65% will be used to cover realtor commissions, closing cost assistance to my buyers, extended holding period costs and any price reductions that I will be forced to take to sell to the first person that comes along that can close a deal. What ever amount left over is additional profit to me.

Holding costs are based on me borrowing at no more than 65% of the ARV, 6 month term, 15%.

  1. Sunderland: 3 bed 2 bath, 1464 sqft, taxes $1,061. asking price $33,900, ARV in today’s market about $90k, ARV in a normal market about 120k $115k, est rent 900

EST REPAIRS
PAINT 1,464
CARPET 2,196
pest 500
HVAC 3,000
DECK 500
APPLIANCES 1,000
LANDSCAPE 500
PLUMBING 1,500
GUTTER 1,500
MISC 2,000
REPAIR ROOF 1,500
FLOORING 500
EST TOTAL REPAIRS 16,160

THE MATH FOR OFFERS
EST AFTER REPAIR VALUE 110,000
x 65% 71,500
LESS REPAIRS (16,160)
LESS MARKETING (5,270)
LESS HOLDING (4,290)
LESS CLOSING (1,500)
LESS MIN PROFIT (15,000)
MAX ALLOWABLE OFFER 29,280
STARTING OFFER 85% MAO 24,888

6 MONTH INTEREST 12% 4,290

  1. Exeter: 5 bed 4 bath, asking $54,900, ARV in today’s market about 100k $120k, ARV in a normal market, about $140k. est rent 850 top floor, 650 bottom unit

THE MATH FOR OFFERS
EST AFTER REPAIR VALUE 120,000
x 65% 78,000
LESS REPAIRS (14,200)
LESS MARKETING (5,270)
LESS HOLDING (4,680)
LESS CLOSING (1,500)
LESS MIN PROFIT (15,000)
MAX ALLOWABLE OFFER 37,350
STARTING OFFER 85% MAO 31,748

6 MONTH INTEREST 12% 4,680

SQFT 2,000
EST REPAIRS
PAINT 2,000
CARPET 3,000
pest 500
HVAC 1,000
APPLIANCES 2,000
LANDSCAPE 500
PLUMBING 500
GUTTER 1,200
MISC 2,500
FLOORING 1,000
TOTAL EST REPAIRS 14,200

  1. New Castle: 3 bed 2 bath, asking $55k, ARV in today’s market about 80k 90k, ARV in a normal market, about $100k. est rent 900, Has backed up sewage problem that flooded basement; will need deep cleaning. Cute house, I’ll make offer to see what bank is willing to do.

THE MATH FOR OFFERS
EST AFTER REPAIR VALUE 90,000
x 65% 58,500
LESS REPAIRS (11,805)
LESS MARKETING (5,270)
LESS HOLDING (3,510)
LESS CLOSING (1,500)
LESS MIN PROFIT (15,000)
MAX ALLOWABLE OFFER 21,415
STARTING OFFER 85% MAO 18,203

6 MONTH INTEREST 12% 3,510

SQFT 2,122
EST REPAIRS
PAINT 2,122
CARPET 3,183
pest 500
HVAC 500
APPLIANCES 1,000
LANDSCAPE 500
PLUMBING 500
MISC 2,500
FLOORING 1,000
TOTAL EST REPAIRS 11,805

  1. Burnt Leaf: 3 bed 2.5 bath, est rent 1100, asking $60k, ARV in today’s market about 100k $115, ARV in a normal market, about $130k

THE MATH FOR OFFERS
EST AFTER REPAIR VALUE 115,000
x 65% 74,750
LESS REPAIRS (13,196)
LESS MARKETING (5,270)
LESS HOLDING (4,485)
LESS CLOSING (1,500)
LESS MIN PROFIT (15,000)
MAX ALLOWABLE OFFER 35,299
STARTING OFFER 85% MAO 30,004

6 MONTH INTEREST 12% 4,485
EST RENT 1,100

SQFT 1,464
EST REPAIRS
PAINT 1,800
CARPET 2,196
pest 500
HVAC 500
DECK 500
APPLIANCES 1,000
LANDSCAPE 500
PLUMBING 500
GUTTER 1,200
MISC 2,500
REPAIR ROOF 1,000
FLOORING 1,000
TOTAL EST REPAIRS 13,196

  1. Cherie: 3 bed 2 bath, asking $59,900, est rent 900, ARV in today’s market about 90k, ARV in a normal market, about $115k

THE MATH FOR OFFERS
EST AFTER REPAIR VALUE 90,000
x 65% 58,500
LESS REPAIRS (11,280)
LESS MARKETING (5,270)
LESS HOLDING (3,510)
LESS CLOSING (1,500)
LESS MIN PROFIT (15,000)
MAX ALLOWABLE OFFER 21,940
STARTING OFFER 85% MAO 18,649

6 MONTH INTEREST 12% 3,510
EST RENT 900

SQFT 1,112
EST REPAIRS
PAINT 1,112
CARPET 1,668
pest 500
HVAC 3,000
DECK
APPLIANCES 1,000
LANDSCAPE 500
PLUMBING 500
GUTTER
MISC 2,000
REPAIR ROOF
FLOORING 1,000
TOTAL EST REPAIRS 11,280

  1. Trenton: 3 bed 2 bath, est rent 1000, asking $59,900k, ARV in today’s market about 90k 100k, ARV in a normal market, about $115k. I like this house, light rehab

THE MATH FOR OFFERS
EST AFTER REPAIR VALUE 100,000
x 65% 65,000
LESS REPAIRS (10,000)
LESS MARKETING (5,270)
LESS HOLDING (3,900)
LESS CLOSING (1,500)
LESS MIN PROFIT (15,000)
MAX ALLOWABLE OFFER 29,330
STARTING OFFER 85% MAO 24,931

6 MONTH INTEREST 12% 3,900
EST RENT 1,000

SQFT 1,360
EST REPAIRS
PAINT 1,360
CARPET 2,040
pest 500
HVAC 500
APPLIANCES 1,000
LANDSCAPE 500
PLUMBING 500
MISC 1,500
FLOORING 2,100
TOTAL EST REPAIRS 10,000

  1. Downs: 4 bed 2 bath, asking $59k, ARV in today’s market about 90k, ARV in a normal market, about $117k

THE MATH FOR OFFERS
EST AFTER REPAIR VALUE 115,000
x 65% 74,750
LESS REPAIRS (10,995)
LESS MARKETING (5,270)
LESS HOLDING (4,485)
LESS CLOSING (1,500)
LESS MIN PROFIT (15,000)
MAX ALLOWABLE OFFER 37,500
STARTING OFFER 85% MAO 31,875

6 MONTH INTEREST 12% 4,485
EST RENT 1,000

SQFT 1,998
EST REPAIRS
PAINT 1,998
CARPET 2,997
pest 500
HVAC 500
APPLIANCES 1,000
LANDSCAPE 500
PLUMBING 500
MISC 1,500
REPAIR ROOF 1,000
FLOORING 500
TOTAL EST REPAIRS 10,995

Thru the course of this I found two addtional properties to make offers on, so I’ll add them as well

  1. Blacksmith: 3 bed 2 bath, asking $60k, ARV in today’s market about 115k, ARV in a normal market, about $140k, rent 900

THE MATH FOR OFFERS
EST AFTER REPAIR VALUE 115,000
x 65% 74,750
LESS REPAIRS (15,000)
LESS MARKETING (5,270)
LESS HOLDING (4,485)
LESS CLOSING (1,500)
LESS MIN PROFIT (15,000)
MAX ALLOWABLE OFFER 33,495
STARTING OFFER 85% MAO 28,471

6 MONTH INTEREST 12% 4,485
EST RENT 900

SQFT 1,156
EST REPAIRS
PAINT 1,156
CARPET 1,734
pest 500
HVAC 3,000
DECK 1,500
APPLIANCES 1,000
LANDSCAPE 500
PLUMBING 500
MISC 2,110
REPAIR ROOF 2,500
FLOORING 500
TOTAL EST REPAIRS 15,000

  1. Marbut: 4 bed 2 bath, asking $85k, ARV in today’s market about 80k, ARV in a normal market, about $100k. It is a mess and has a squatter (or two) living inside it.

THE MATH FOR OFFERS
EST AFTER REPAIR VALUE 80,000
x 65% 52,000
LESS REPAIRS (23,604)
LESS MARKETING (5,270)
LESS HOLDING (3,120)
LESS CLOSING (1,500)
LESS MIN PROFIT (15,000)
MAX ALLOWABLE OFFER 3,506
STARTING OFFER 85% MAO 2,980

6 MONTH INTEREST 12% 3,120
EST RENT 850

SQFT 1,936
EST REPAIRS
PAINT 3,500
CARPET 2,904
pest 1,000
HVAC 3,000
DECK 1,000
APPLIANCES 1,000
LANDSCAPE 500
PLUMBING 2,000
GUTTER 1,200
MISC 3,000
REPAIR ROOF 3,000
FLOORING 1,500
TOTAL EST REPAIRS 23,604

As I mentioned earlier, you can’t make offers at MAO, as MAO is the most that you should pay for them. That said I’ll take the MAO, multiply it by 85% and make offers and counter offers upwards from there. I don’t expect to get my offer prices for all of these, but I do expect to get reasonably close on two or three.

Since all of these are bank owned properties, I will have to deal with these according to SOME of their rules. I’ll have to use their contracts (which I can easily get from any realtor) and submit them thru the listing agent. That isn’t a problem and I have no issue with that. They will also expect for me to use their closing attorney and put down a large amount of money as earnest money; not going to happen! I’ll make all my offers with no more than $500 and use my closing attorney; take it or leave it. Some will, some won’t, so what, someone will.

On the contract offers, I’ll include the following stipulations:

  1. Offer contingent on seller having clear title
  2. Buyer has a 15 day inspection period
  3. I will use my closing attorney
  4. Seller will contribute up to 3% towards buyers closing costs
  5. $500 earnest money
  6. I’ll close on or about 30 days from my receipt of the sellers acceptance of my offer.

The next step is to print out the offers and fax them to the realtors. Included with my offers will be a proof of funds letter from one of my private lenders that states that I have exactly the amounts needed to close the deals and a photo copy of my earnest money check made out to my closing attorney as escrow agent. Today I’ll do just that and give the realtors about 5 days to respond with a denial or counteroffer. I am not worried about giving them 5 days to respond as I don’t see many people out there besides investors that will be making offers on these over the period.

I’ll followup within 24 hours of faxing my offers over to them for reciept and then followup again on the 5th day. For every counter offer I intend to go up maybe 10-15% each time, never exceeding the MAO. If I don’t get these properties, I do have alternative sources of properties, such as investors that buy REOs in bulk to target and work with.

In the mean time, I still need to find some more private lenders so I’ll need to do some more networking. I’ll let you know how it goes…

Thanks again for following this thread and your input. Please keep the questions and comments coming.

Well play Hassan, so far ur project of negotiating abd buying as an investor is on the right tract ,i will keep on reading ur post and see how u benefit from ur hard work .good luck

Others may be enjoying this but you are wasting valuable time. You are 3 weeks into this and haven’t made one offer yet. Paralysis by analysis. I don’t know if you are doing this thread for your own benefit or for other novice investors. I call BS. You sound like many a guru who gets to the end and says… for $999.99 I will wow you with my BS and tell you all the not so secret ways to succeed. At this rate you will be lucky to make an offer this year. Sorry but I’ve read nothing of value in this thread.

Offers have been made. Faxed them to all realtors. Waiting for responses from sellers.

BTW, for those of you that are curious, in a normal or Hot market, time would be of the essence in making offers and getting these closed, which in many cases can lead to mistakes and huge losses of money if a step is missed.

Fortunately we are not in a hot market, so we can take as long as needed to make sure that the deal is a deal. Inventory (houses) right now are a dime a dozen. Take the time to make sure that you do all of your home work, before you make your offers. The houses aren’t going anywhere any time soon. You’ll be happy that you did.

P.S. when I am done with this string there will NOT be any offers to buy one of my courses or anything. The point of this is really for me, to keep me on track with some of my 2009 goals.

Take care…

Hassan,

Im a little confused on what the “asking price” is. I dont think its what the bank is asking since your MAO is near the asking price.

The asking price is the price that the bank is shopping the house around for. It’s on the numbered line where the property descriptions are. Like here:

  1. Sunderland: 3 bed 2 bath, 1464 sqft, taxes $1,061. asking price $33,900, ARV in today’s market about $90k, ARV in a normal market about 120k $115k, est rent 900

Yeah but your starting offer is 24,888?

Yup. The max I am willing to pay on that one is 29,280. To get there I can’t start negotiations higher than 29,280, it has to be lower than that or 24k. I could care less what the seller is asking because I am the one trying to make the profit. The bank (seller) is just trying to get the best price they can get quickly. Sadly they wont get what they want.